The ledger account is the basic unit in the accounting system. Ledger accounts are set up for each type of financial transaction the entity uses to operate its business. So this allows for records to be kept for all financial aspects of the business.
Types of transactions are classified into assets, liabilities, owners equity, revenue and expenses. The ledger accounts are coded into these sections and a ‘chart of accounts’ lists all the ledger accounts and account numbers.
Records are kept for all the business transactions. So this requires a running balance is kept, so as to record the balance at any point in time.
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